Elder's Trustee & Executor Co Ltd v Deputy Federal Commissioner of Taxation [1934] HCA 42; (1934) 51 CLR 694 (1 October 1934)

HIGH COURT OF AUSTRALIA

Elder's Trustee and Executor Company Limited Appellant; and The Deputy Federal Commissioner of Taxation Respondent.

H C of A

1 October 1934

Starke J.

Ligertwood K.C. (with him Ross), for the appellant.

Mayo K.C. (with him Brebner), for the respondent.

Ligertwood K.C., in reply.

The following written judgment was delivered:—

Oct. 1

Starke J.

Estate duty is imposed upon the value, as assessed under the Estate Duty Acts, of the estates of persons dying after the commencement of the Acts. It is imposed upon the total or gross value of the estate, after deducting all debts (Estate Duty Act 1914; Estate Duty Assessment Act 1914-1928, secs. 10 (2), 15, 17). Alfred Edward Jolly died on 11th August 1933, leaving a large estate, including government bonds and shares in various companies. The appellant, his administrator, made a return of his estate, as required by the Estate Duty Acts. It stated the value at which the bonds and shares were quoted, and could be sold, on the Stock Exchange, on the 11th August 1933: in other words, the amount that a purchaser on the exchange would have given for the bonds and shares. It also stated the brokerage that would have been payable by the seller if the shares had been sold on the exchange on that date; and they could not, for practical purposes, be realized except through brokers on the exchange. The amount of the brokerage would have been £2,373. The appellant claimed to deduct this brokerage from the market value of the bonds and shares, for the purpose of ascertaining the value of the estate of the deceased under the Acts already mentioned, but the Commissioner refused to allow the deduction.

In my opinion the Commissioner was right. It is the value of the property that must be assessed. The price that it will fetch if sold in the open market is one test of value—the price that a purchaser will give for it. Brokerage would normally be reflected in this price in the case of bonds and shares sold on a Stock Exchange, though I am informed that the buyer and seller both pay brokerage in the case of the sale of shares on the Stock Exchange in Adelaide. But the amount that is produced to the seller, or that comes home to the seller, after deducting the costs of realization, is not the value of the property, but the result to him of its sale (Cf. Leycester v. Logan[1]).

The case of Commissioner of Stamp Duties (Q.) v. Lansdowne[2] is relied upon by the appellant. It is a decision of this Court, and binds me. It was decided under the Succession and Probate Duties Acts 1892-1920 of Queensland. The 12th section of those Acts provided that "there shall be levied and paid to His Majesty in respect of every ... succession ... according to the value thereof at the time when the succession takes effect the following duties ..." The estate of the testator included certain shares which were valued at the market quotation for those shares on the date of the testator's death, less brokerage, which would be payable on the realization of the shares. The headnote states that it was held that for the purpose of ascertaining the value of the shares brokerage should be deducted from the market value of the shares. Isaacs and Higgins JJ. insist that it is the net value of the succession to the successor that is to be taxed, and the net value of the succession is what remains after deducting any necessary and proper expenses. "The value to the successor," said Higgins J., "is expressed by the money which he would receive if it were sold"[3]. But in the present case, it is not the value of a succession that is being ascertained, but the value of the estate or property of a deceased person. It is true that, as Mr. Ligertwood said, the subject of valuation was represented in each case by shares in companies. But the value of a succession to shares in a company is not necessarily, according to the learned Judges in Lansdowne's Case[4], the same thing as the value of the shares.

The appeal is dismissed.

Appeal dismissed with costs.

Solicitors for the appellant, Thomson, Buttrose, Ross & Lewis.

Solicitors for the respondent, Fisher, Powers, Jeffries & Brebner, agents for W. H. Sharwood, Commonwealth Crown Solicitor.

[1] [1858] EngR 1050; (1858) 4 K. & J. 725; 70 E.R. 301.

[2] [1927] HCA 29; (1927) 40 C.L.R. 115.

[3] (1927) 40 C.L.R., at p. 125.

[4] [1927] HCA 29; (1927) 40 C.L.R. 115.